What may have once been unthinkable is now the new normal. We live in a world of negative interest rates. For pension funds, which safeguard the financial security of tomorrow’s retirees, this means the future is unclear at best. “We are in uncharted territory,” says Innes McKeand, head of equities at AustralianSuper Pty, the largest pension fund in Australia. “Those of us who have been around a long time are struggling to get our heads around giving money to a European government, and they will give you a negative return for 30 years.” What are the other options—go big on private equity? Explore riskier markets? Or should you simply readjust your expectations for returns? Bloomberg Markets spoke with those currently struggling with this conundrum about their subzero strategies.

Ben Meng 
Chief investment officer at California Public Employees’ Retirement System

“We should carefully study the experience of Japan in the past decades and, to a certain extent, the recent history of Europe. We can gain insight from what’s happened elsewhere.”

Sandor Steverink 
Head of Treasuries at Dutch Pension Fund APG Group NV

“Investors are forced to look at other asset classes for more attractive returns. This has pushed up prices in all accessible liquid assets and is causing long-term value investors like APG to look even further away, outside the euro zone and in more complex or less liquid real assets.”

Rich Robben
Executive Director, Office of Investments at Kentucky Retirement Systems

“You can up your risk, or you can just be cognizant of the fact that there’s not that much return available and lower your assumed rates. Our assumed rate of return is the lowest in the country—5.25% for our really poorly funded plans.”

Carsten Quitter 
CIO at Munich-Based Financial-Services Company Allianz SE

“In the future, we will continue to diversify even more into non-exchange-traded asset classes.”

Andrew Sawyer 
CIO at Maine Public Employees Retirement System

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